Trouble began for the U.S. banking system on March 8 when cryptocurrency-focused bank Silvergate Capital announced it would cease operations.
When chaos erupted at Silicon Valley Bank (SVB) the next day, its stock dropped 60 percent and talk of a bailout began.
DON'T MISS: Cathie Wood Calls One Reaction to SVB Collapse 'Disturbing'
On March 10, a run on SVB's deposits caused the bank to fail. Regulators took it over.
Investors scrambled to figure out market implications of these events as they also caught up to First Republic (FRC) and Signature Bank (SBNY) stocks.
Meanwhile, Ark Invest's Cathie Wood believed the immediate mainstream explanation for SVB's collapse was off the mark.
An assumption existed, largely because Silverdale fell first, that all these developments were an extension of the crypto failures of 2022. Wood has a different interpretation.
"Despite mainstream rhetoric, equity and fixed income markets are beginning to recognize that crypto had nothing to do with the bankruptcies of Silicon Valley Bank and Signature Bank," she wrote with Yassine Elmandjra in an Ark newsletter March 20. "Instead, they began to implicate the U.S. Federal Reserve’s (Fed’s) ill-advised decision to push up interest rates 19-fold, a record-breaking rate, in less than a year."
Wood noted that between March 11 and March 14, as banks were tripping and falling, Bitcoin, Ethereum and other crypto networks "didn't skip a beat." Bitcoin appreciated about 20% during the period.
"In the face of the U.S. and European banking crises, bitcoin’s price appreciation suggests that lax regulatory oversight had no impact on the decentralized, transparent, and auditable crypto asset ecosystem," according to the newsletter. "Quite the opposite, bitcoin and other crypto assets are acting like safe havens."
Wood believes that cryptocurrency's main attributes are precisely what is needed in the current environment.
"Demand for more transparent, auditable, and decentralized financial services has soared because, in our view, crypto is a solution to the central points of failure, the opacity, and the regulatory lapses in the traditional financial system," the newsletter said.
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